Retail Weeding Expected

Store Glut, Cash Shortages Cited After Weak Season

January 12, 1996|By DAVID ALTANER Business Writer and Information from Bloomberg Business News was used to supplement this report.

Trouble is brewing in the world of retail, much as had been predicted after a weak holiday shopping season.

On Thursday, Barneys Inc., a 72-year-old Manhattan institution, filed for Chapter 11 protection from its creditors. The company blamed its problems on its partner, the Japanese retailer, Isetan Co.

The news followed other bad news earlier this week from local companies. It is the followup to a holiday shopping season that was one of the weakest in years.

The retailers' problems, however, don't necessarily spell trouble for the U.S. economy, because overall retail sales aren't dropping, according to one economist.

"There are too many stores," said William Ramsay, an economist for Barnett Bank. "There's going to be some weeding out going on."

Earlier this week, came the news from Spec's Music that one of its lenders, NationsBank, has declared the Miami-based music retailer in default of a $14 million unsecured credit agreement and has demanded full repayment.

L. Luria & Son, the Miami-based retailer, hired a new chief executive to turn around the company's losses, which are expected to reach $14 million for 1995.

Also this week, analysts told The Wall Street Journal that national electronics retailer Best Buy is asking suppliers for more time to pay for goods that it couldn't sell during the holiday season. Best Buy spokeswoman Laurie Bauer wouldn't comment on the company's relationship with its suppliers.

"We have an adequate cash flow to meet our operations," Bauer said.

Best Buy posted a lower-than-expected 3 percent gain in sales at stores open more than a year for the season. But Bauer said the company did not intend to curtail its plans to open 25 stores this year, including a half-dozen in the Tampa area. Melville Corp. also cut its dividend to 11 cents a share from 38 cents a share. Melville is spinning off its toy and footwear stores and is trying to sell its Wilsons leather and This End Up furniture stores.

Barneys said Thursday that it doesn't expect to close any stores, including its new outlet store at Sawgrass Mills in Sunrise.

The privately held retailer said it plans to sue its partner, Isetan, to recover more than $50 million in financing that it claims was unfairly withdrawn.

Isetan had bankrolled Barneys' move from a single, lower-Manhattan site, to 17 sites, including Tokyo, Singapore and Beverly Hills.

Barneys said Chemical Bank agreed to provide $100 million in financing while it is in bankruptcy.

"We have exhausted all other feasible procedures to bring this partnership equity structure to completion and we must take this legal step to protect the best interests of Barneys Inc., our employees, our creditors and suppliers," President Charles Bunstine said in a statement.

Spec's spokeswoman Barbara Goldberg said the company was negotiating with NationsBank but had nothing new to report. The company has been hurt by discounters such as Best Buy and Circuit City who have cut CD prices to attract electronics customers.

NationsBank spokesman Fred Hannon said it could not discuss its relationship with a client.

Information from Bloomberg Business News was used to supplement this report.